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DMV hearing officer rules against Tesla Motors request for Richmond-area dealership
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DMV hearing officer rules against Tesla Motors request for Richmond-area dealership

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A hearing officer with the Virginia Department of Motor Vehicles has recommended that the agency reject Tesla Motors Inc.’s request to open a company-owned dealership in the Richmond area.

Tesla, a California-based maker of electric vehicles, filed a request with the DMV earlier this year seeking an exemption from a state law that prohibits car manufacturers from owning dealerships in most circumstances.

Tesla argued that there are no independent automobile dealers in the Richmond area capable of profitably selling its specialized, battery-powered cars.

The company’s request for an exemption was opposed by the Virginia Automobile Dealers Association, a powerful trade group that represents independent automobile dealers in the state.

The association argued that there are dealers willing and capable of selling Tesla cars and that the company was simply trying to circumvent state law.

Three full days of hearings were held — one each in March, April and June — before an appointed hearing officer at the DMV’s headquarters office in Richmond. Thousands of pages of documents were submitted and more than 20 hours of testimony were presented by both sides.

“Simply put, the evidence does not support Tesla’s request,” the hearing officer, Daniel P. Small, wrote in a 17-page recommendation submitted this week. “There are dealers independent of Tesla — at least 11 of them — prepared to be Tesla dealers.”

Small’s recommendation is not the final word on the subject. It now goes to DMV Commissioner Richard Holcomb, who will decide whether to grant Tesla’s request. A final decision could take up to 60 days.

Tesla was still reviewing the hearing officer’s recommendation and was not ready to make a statement Thursday, according to a representative for the company.

VADA released a statement praising the recommendation.

“Decades ago, the General Assembly decided that consumers and the public interest are best served by dealerships owned and operated by franchisees independent of vehicle manufacturers,” said Don Hall, president of the association.

“We welcome Tesla in Virginia, but the company must operate according to the commonwealth’s laws and the public interest.”

Founded by tech industry tycoon Elon Musk, Tesla sells its electric cars directly to customers at fixed prices.

The company has been opening its own showrooms and retail stores around the country, a move that has faced resistance from independent dealers in many states where long-standing laws prohibit vehicle manufacturers from controlling the retail end of the business.

In Virginia, state law prohibits a manufacturer from owning a dealership unless there are no independent dealers available in a community to sell the manufacturer’s vehicles “in a manner consistent with the public interest.”

Tesla previously won an exemption to operate one store in Virginia near Tysons Corner. That store opened in 2015, but only after Tesla went to court and reached a legal agreement with the Virginia DMV and the automobile dealers association.

The hearing officer’s recommendation is “logical, coherent and consistent with Virginia statutes,” said George E. Hoffer, an economics professor at the University of Richmond who has followed the auto industry for decades.

However, the issue isn’t going away because of one decision, Hoffer said Thursday.

“In my opinion, this and similar issues will not go away and will continue to keep VADA (the automobile dealers association) on the defensive,” he said.

“Virginia, as well as most other states, have a body of motor vehicle franchise laws and statutes that have not kept up with rapidly changing retail technologies and changing consumer preferences.”

At the DMV hearings this spring and summer, Tesla and the dealers association had expert witnesses testify to support their positions.

Owners of several automobile dealerships in the Richmond area testified that they were interested in selling Tesla cars, while lawyers and executives for the company argued that the dealers could not do so profitably. Local owners of Tesla automobiles also attended the hearings to support the company.

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